Question for those who have been in debt.

thelastoneonearth · ‎10-20-2014

I'm currently at 7k in debt. Here's my story:

I'm 22 years old, and two months ago, I moved from Chicago to Indianapolis. I lived with my parents those 22 years, but a job that makes me more money, led me here. Before I moved out, I had paid 2k in debt. I was debt free! However, moving costs and buying things for my apartment started to accrue the debt I had paid off. After obtaining cards, and using them stupidly. I have 100% payment history, no baddies, and my score is in the low 620's. I'm awaiting for a personal loan approval (have to submit income verification.) Im using that loan to erase the debt I've accumulated.

So here's my question: After paying off all the debt with this loan: Should I close cards and start fresh, garden, and etc? Or should I just maintain them to avoid a hit to my CR?

Capital One Secured Platinum $750.00, Amazon Store Card $500.00, AEO Visa $4000.00, PlayStation Credit Card $500.00, My BestBuy Platinum MasterCard $1000.00 Amazon Chase $500.00 Discover IT $1500. Chase Disney Premier Visa $5000. Barclays Carnival Cruise MasterCard $500 Bank of America Norwegian Visa Signature $1500 "Apple Card" $1700 Chase Sapphire Preferred $5,000

My future card list:
Amex BCE
Citi Hilton Honors
AAOA 1.2years

Anonymous · ‎10-20-2014

Generally, closing credit cards is not a good idea. Keep them open. They keep the average age of your accounts older. If any of your cards have annual fees etc, consider closing them unless they are part of a rewards strategy.

Don't use your credit card as a loan (unless its a zero percent APR introductory period and your overall credit utilization percentage is low). Track your expenses using budgeting software. Several options exist. I personally use Mint, but I have friends who swear by other programs.

Swearing off credit is not a good idea for most. In our society, credit is very important. We need it when buying cars and houses. Developing your credit now will help you down the road when you want to buy a car or a house.

You don't need more credit cards. Use the ones you have. Your credit utilization rate should be low after you pay off the cards. Some people like to get a lot of varied cards for reasons like rewards (I am one of them). Nothing wrong with doing that, but at 22 with a 620 FICO score and debt, you might want to focus on paying off your debt first. The good news for you is that 7k is not all that much debt. You are young and if you play it smart you will be in a much better position than most Americans. Most of us (me included) do stupid things when we are young. Learn from your mistake and all should be well.

takeshi74 · ‎10-21-2014

@thelastoneonearth wrote:
Should I close cards and start fresh, garden, and etc?

You have to determine what works for you. If you need to close cards to avoid debt then that could be a suitable solution. If you want to improve your credit there's no reason to close anything unless there are accounts that you just don't need. If you have no derogs then closing accounts in good standing won't help you.

compassion101 · ‎10-22-2014

You just need to learn to budget is all. At 22 I couldn't budget either, took me till 30s. Now I know every month several months ahead exactly what I plan to spend and bring in and what my balance will be in 3 months. I adjust every week or so based upon actual spending.

If you can budget you will be fine. If not, you are just replacing one debt for another and it will get worse over the years. Good luck!